A Treatise on the economics of Skyrim
by r4g6
Summary: The following set of essays (to be released weekly) follow my personal exploration into the economics of Skyrim. It will be split into two separate parts. Part One: Observations of Skyrim's economy Part Two: The effect of Independence. As such, the main focus will be on mapping the economics of Skyrim and then applying the event of independence to that framework.
1. Introduction: Methodology and Assumption

**Introduction and Methodology**

This treatise is being written with the goal of accurately piecing together what exact shape the economy of Skyrim would be following a Stormcloak victory in the civil war. I will go about determining this suitability by first observing the economic trends of Skyrim itself, and then within the context of the wider Empire. Finally, given the information I will gather, I will assess the economic case both for and against independence, followed by a prediction of what will happen if independence does happen.

Skyrim, and the Elder Scrolls series in general, often exist with economies detached from the lore of the game for the sake of scaling gameplay. As such, the methodology I will use assumes the absence of a dragon born and thus eliminates the unanswered question of certain individuals singlehandedly flooding the Iron Dagger market to reap great profits. Prices do not go up or down through supply and demand, rather through skill trees focused on speech and bartering. Such flaws to the basic human action of exchange almost kills this treatise before it has begun, and I will therefore discount such irrational behaviour.

Exchange is the crux of all economic action. Skyrim, like the rest of the Empire, uses money as a medium of exchange and so it is a step above a primitive and low-productivity barter system. What is also immediately observable is that almost all exchange is voluntary[1](besides that of taxation of course) and that opens the door to more solid economic laws which we can apply.

Firstly, that of rational choice theory: that economic actors in Skyrim's economy are 'goal orientated' and thus choose to make the action which furthers their agenda at the least cost. As an example, if a nord had the choice between purchasing wine or purchasing eggs, and his goal was to get drunk, it would be rational to assume the action he would take would be to buy the wine. This model can then be applied to all exchange within Skyrim and will aid us in predicting the reaction of economic actors to the circumstances of an independent Skyrim. The second assumption to make is that Skyrim's economy and prices adhere to the Subjective Theory of Value. Whilst it may be tempting, given the lack of many capital goods and the labour heavy production methods, to sit back and use the Labour Theory of Value, the subjective alternative is universal and more widely accepted in modern economic circles. The theory states that when an exchange is made both parties believe that which they trade has less value than that which they trade for. This is because, rationally speaking, one does not voluntarily make a loss in an exchange (even if those outside perceive it themselves, subjectively, to be a loss). To take a real-world example: the natives traded the island of Manhattan for a few beads from the Europeans. This exchange seems almost non-sensical from an outside subjective perspective, tinted by hindsight, but at the time it was most certainly seen by the natives as a mutually beneficial trade given how highly they subjectively valued the beads. It can even be said that following this transaction, the self-assessed wealth of both parties increased. Therefore, I will follow the notion that when individuals can freely exchange, the total wealth increases.

How does this relate to prices? Put simply, competition between individuals seeking to trade goods or services they possess for those they perceive as having higher value to them, using money as a medium of exchange, results in a market equilibrium. This equilibrium can easily be affected by outside influences which can alter the values first used when making decisions. To use a Skyrim based example: the civil war has led to greater danger of death to the general populous and, given individuals are goal oriented and wish not to die, individuals now subjectively value swords and armour more highly. As such, the competition for such goods and services (the services being the use of a blacksmith or enchanter) increases as economic actors rush to trade money[2]for this good in high quantities. This increase will stay constant until the cost is so high that the marginal utility (that being the subjective value gained) of exchanging one's property (money) for a sword or armour is nil and a new, inflated, equilibrium is set.

This initial methodological stage may come off as pedantic and overly complicated, but I assure you that it is imperative. In order to properly simulate the effects on a new economy, that being an economy defined by new borders, trade relations and politics, it is vital that an internally consistent set of laws are observed by which we can safely draw accurate conclusions.

* * *

[1] There is no large-scale state oversight into the economic actions of those who reside in Skyrim nor is there any such compelling of disassociation (bar Windhelm and the Argonians). Association is also demonstrably voluntary given the large number of bandit groups and the hegemony of certain settlements such as the Orc strongholds or districts in cities like Windhelm.

[2] It is worth mentioning that it is not money itself that they value as being less than that of a sword or shield. Rather, it is the opportunity cost (the alternative uses for the money which they are foregoing) that they value as being less than that of acquiring of sword or shield.


	2. Chapter One: Towns and Cities

**Part One: Observations of Skyrim's economy**

**Chapter One: The Economic Makeup of Cities and Towns**

Beginning with the most basic building block to any economy, Skyrim can be described as a late feudal/early capitalistic society. We can observe this as, in the world, cities are the hubs of 'capital' and money, whilst the countryside is generally unadulterated or littered with homestead farms or bandit camps. As such, we can then say that the existence of these homesteads indicates some sort of private ownership of land. Indeed, the player can purchase property in certain cities and towns which he then has exclusive right to occupy. This assumption is derived from custom as, in today's world, it is not entirely correct to say that one's property is exclusively his own as it is possible for a violent force, that being the state, to come and confiscate it from him. So, it is the same in Skyrim. Land and property are commodified and sold under the eyes and sword of the local Jarl.

What I am getting at is that this is not a conventional feudal exchange. There is no system in place by which those living in towns (Whiterun for instance) are bound to the service of the Jarl by their residing within his walls. Citizens do not work for the Jarl but for themselves and this allows a general rise in total wealth across the province as regular folk keep more of what they produce and then are able to sell the rest. Whilst in the game it is very possible to sell your goods to a shop keeper, it is unlikely that such a thing would happen on a large scale. Generally, we can assume a shop keeper in Skyrim would purchase his stock at below market rate and then sell it for more. Otherwise, how is he to profit?

More primitive, 'genuine', markets are how these goods reach consumers and how farmers and producers of more general goods, like textiles or furniture, receive an income. There are many examples of this sort of market but the most obvious is certainly the marketplace in Riften. As is to be expected, it lies centrally in the town complete with many permanent wooden stalls as well as a place for caravans which have been brought in from outside the walls. Every generic, every day, economic action stems from this market place and it is the fabric of exchange in Skyrim's sparse society. It serves as one of the few places of congregation for everyone, resident or traveller, and is the main medium by which individuals trade and receive goods to raise their standard of living. It is also an efficient means to distribute surplus production by which all parties' benefit:

_If the lowly homesteader has produced a surplus (that being more than is needed to feed himself and his family) of grain or vegetables one year, he can then take it to the market and sell it in parts to anyone willing to buy it, garnering himself some septims for his trouble. If he would like to avoid the costly (cost in terms of lost productivity or cart bills) excursion, he could even sell it below market price to one of the regular store holders at the said market for them to then sell on to consumers. In this situation all have benefitted: the homesteader has benefitted (from more income and from the gained productivity of not having to clear his rotten surplus next season), the marketeer has benefitted (in making a profit on goods he himself did not produce) and the consumer has benefitted (for had this surplus not reached the market, he would not have been able to purchase it and then consume it). _

The city or town is thus the economic hub for the urban and rural populace and serves as the primary macroeconomic foundation for both. However, exchange is not confined to a single 'marketplace' per town. That being, it is certainly possible for exchange to occur outside of the boundaries of the said marketplace. For some crafts or sectors, it is logistically impractical to attend a conventional marketplace so instead, the market is brought to them. Such are the practicalities of the Blacksmith, Inn or Tavern.

Each enterprise is characterised by high levels of costly, immovable capital. For the smith, his forge, for the innkeeper, his Inn, and for the Tavernkeeper, his tavern. Each requires property to function and free exchange to prosper (or disintegrate). The tavernkeeper must procure his mead and food to sell to his patrons, the innkeeper must purchase beds and warm furs for his guests and the blacksmith must purchase raw materials and ores from which to forge his goods. All this action is for the goal of profit. These industries, in times of civil war, such as those present in Skyrim, are expected to remain profitable even if though it is most probable that general wealth has fallen and incomes along with them. War brings more contracts to the smith. War brings more mercenaries to the Inn. War brings more alcoholics to the tavern.

Each business, given the large capital base required to produce, often operate within city walls under the lawful protection of the local Jarl, enforced by the Hold Guard. This ensures a meaningful level of confidence in exchange and the fulfilment of contract[1]. On top of this, the presence of Hold guards reduces the likelihood of property destruction or general petty theft. These facts are encouraging to my writing as they imply a high level of confidence between consumer and producer. Of course, the civil war turns such observations on their head and the effect of the civil war will be reviewed in a later chapter. At the end of each of these chapters, I will look back at my writing and ask: what effect would the civil war have on these functions?

The final exchange in cities occurs outside of their walls. That is the Khajit caravans who travel to and camp at the city gate to sell their wares. The existence of such caravans is highly promising as it shows some semblance of mobility and velocity of goods travelling around Skyrim and being distributed not only where they are produced, but all around the Holds. Given the nature of travelling with goods or services to sell, and before the existence of refrigeration, it is ok to assume that the goods sold would most likely not be perishable and may even represent more luxury goods. An example of these would be spices or jewellery and, in the case of services, transferrable skills with bows or stealth. These are all purchasable from Khajit outside most city walls along with all the generic goods which are universally available from every vendor in the game.

This is thus another area of economic action and wraps up (to the best of my knowledge) the economic makeup of cities and towns within Skyrim. One question may remain on your lips though: What about the economic impact of Jarls and local government? This topic will be covered in a future chapter.

* * *

[1] Contract is most likely not a fully fulfilled concept within the Empire as most duties are bound by unspoken traditions of honour and loyalty. As an example, when hiring a companion to accompany you, it is interpreted as a transaction of septims without the need for a written agreement bound by terms or conditions.


End file.
